Reference no: EM132523184

Point 1: Isha Berhad owns a production facility. Production facility comprises of both the factory and plant and machinery. On January 2019, this production facility has started to show some indications of cracks in the walls, ceilings and outside brickwork. Isha Bhd will commence some major upkeep sometime during 2020 to solve this issue. However, Isha Bhd's accountant does not think the cracks in the walls as a sign of impairment of an asset. Thus, the accountant has decided not to disclose the issue at financial year ended 30 June 2019. Further his argument was no repair costs have yet been undertaken so far, hence there is no obligation for Isha Bhd to repair the production facility, and therefore no provision for the repair should be made as at 30 June 2019. Isha Bhd has revaluation policy for property, plant and equipment. Prior to subsidence of production facility, Isha Bhd had a balance on the revaluation surplus of RM5 million in the financial statements for the year ended 30 June 2018. None of this balance related to the production facility so the accountant advised the board that this surplus can be utilised for any future loss arising from the subsidence of the production facility. The current year end is 30 June 2019.

Required:

Question 1: Advise the directors of Isha Bhd as to whether the accounting treatments used by the accountant are relevant according to MFRS. Your answer should make reference to relevant MFRS Standards